Interest-Rate Management / Edition 1

by Rudi Zagst

Overview

Who gains all his ends did set the level too low. Although the history of trading on financial markets started a long and possibly not exactly definable time ago, most financial analysts agree that the core of mathematical finance dates back to the year 1973. Not only did the world's first option exchange open its doors in Chicago in that year but Black and Scholes published their pioneering paper [BS73] on the pricing and hedging of contingent claims. Since then their explicit pricing formula has become the market standard for pricing European sk op­ tions and related financial derivatives. In contrast to the equity market, no comparable model is accepted as standard for the interest-rate market as a whole. One of the reasons is that interest-rate derivatives usually depend on the change of a complete yield curve rather than only one single interest rate. This complicates the pricing of these products as well as the process of managing their market risk in an essential way. Consequently, a large number of interest-rate models have appeared in the literature using one or more factors to explain the potential changes of the yield curve. Beside the Black ([Bla76]) and the Heath-Jarrow-Morton model ([HJM92]) which are widely used in practice, the LIBOR and swap market models introduced by Brace, G~tarek, and Musiela [BGM97], Miltersen, Sandmann, and Son­ dermann [MSS97J, and Jamshidian [Jam98] are among the most promising ones.

Product Details

ISBN-13:	9783642087080
Publisher:	Springer Berlin Heidelberg
Publication date:	12/07/2010
Series:	Springer Finance
Edition description:	Softcover reprint of the original 1st ed. 2002
Pages:	341
Product dimensions:	6.10(w) x 9.25(h) x 0.24(d)

Table of Contents

1 Introduction.- I Mathematical Finance Background.- 2 Shastic Processes and Martingales.- 3 Financial Markets.- II Modelling and Pricing in Interest-Rate Markets.- 4 Interest-Rate Markets.- 5 Interest-Rate Derivatives.- III Measuring and Managing Interest-Rate Risk.- 6 Risk Measures.- 7 Risk Management.- 8 Appendix.- References.

Editorial Reviews

From the reviews:

"The book Interest Rate Management by Zagst is … ‘written for students, researchers, and practitioners who want to get an insight into the modelling of interest-rate markets as well as the pricing and management of interest-rate derivatives’. ... a book that is both mathematically rigorous and shows practical applications of the theory. ... It is a compact introduction into the modern martingale-based approach of developing interest rate derivative models. … a good overview is given to the relevant literature." (Prof. Dr A. A. J. Pelsser, Kwantitatieve Methoden, Vol. 72 (B6), 2003)

"A very promising book on interest rate theory, written with special care and precision. Rudi Zagst manages to give an all-inclusive presentation of the topic, putting special emphasis on measuring and hedging financial risks. This makes the book unique among others, in exposing the reader to the entire financial engineering process – from mathematical modelling and pricing to the risk and asset management of a complete portfolio. … ‘Interest rate management’ is mostly recommended to graduate and PhD students in mathematics or finance." (Nikos Thomaidis, www.quantnotes.com, November, 2003)

"If you are interested in the totally awesome world of advanced mathematical finance, you should look at Interest Rate Management by Rudi Zagst. The book is written for those who want a rigorous look at the modeling of interest-rate markets. A fascinating book … ." (Bulletin of Mathematics Books, Issue 42, November, 2002)

"This book addresses the needs of both researchers and practitioners. It combines a rigorous overview of the mathematics of financial markets with an insight into the practical applications of these models to the risk and portfolio management of interest rate derivatives." (Bank-Forum, Issue 30, 2003)

"This book is essentially about two main topics: first of all about the mathematics ofinterest-rate markets, and secondly about risk management issues in such markets. … All in all, an interesting book which offers first insight into the world of true money-market risk management. By keeping content and length well balanced it will be easy to base a course on it." (P.A.L. Embrechts, Short Book Reviews, Vol. 23 (1), 2003)

"The aim of the present book is to give a professional insight into the field of modelling an interest-rate market … . The book is addressed to students, researchers, and practitioners that are interested or work directly with the models of interest-rate markets, as well as for pricing and management of interest-rate derivatives. … Satisfying the needs for both practitioners and researchers, the present book brings a valuable contribution … to fill the gap between theory and practice within the investigated field." (Neculai Curteanu, Zentralblatt Math, Vol. 987 (12), 2002)

From the Publisher